Monday, November 29, 1999

Tata Group to refocus on fast-track Indian market to power growth

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For Tata Group, India's 142-year-old home-grown business conglomerate which derives 54% of its consolidated revenues from abroad, home is definitely where the heart is.The country's second-largest industrial group by sales after Reliance Industries is positioning itself for new growth avenues in the domestic market. The group will leverage the twin advantages offered by India —sustained high growth and avenues for frugal innovation — for growth. In 2009-10, the salt-to-software conglomerate witnessed a combined 5% revenue dip for its 27 listed companies, due to aftershocks from the global financial turmoil.The group posted consolidated revenues of Rs 2.88 lakh crore in 2009-10, compared to Rs 3.06 lakh crore in the previous year, with companies like Tata Steel, Tata Chemicals and Indian Hotels taking substantial hits. One of the immediate goals for executives of Tata Group companies — with the exception of Tata Consultancy Services — would be to look closely at opportunities on the home front, where GDP growth in the last quarter of FY10 touched 8.6.%.Says Raju Bhinge, CEO of Tata Strategic Management Group: "When you are faced with a situation where growth is 1-2% in a certain economy but 8% in another (read India), there is an urge to cater to the growing demand here and now. The spinning back of the Indian economy has been faster than anyone expected." Tata Strategic Management Group is the in-house consultancy firm that works with group companies to sharpen competition apart from serving external clients. Bhinge, however, adds that there cannot be a one-size-fits-all approach for group companies.A Tata group spokesperson said: "Every Tata company operates independently and each company autonomously decides and implements its growth strategy." A domestic focus may not immediately alter the contribution of international operations to the group's overall revenues, but it could change over the long run.Innovation, the other thrust area, is emphasised at all the annual meetings group chairman Ratan Tata has with top executives. "Group companies are encouraged to look at mass markets wherever applicable," says Bhinge. The Nano, Indica and the water purifier Swach are some examples of this initiative.Tata Chemicals MD R Mukundan told FE that the company is even working on new variants of salt at its innovation labs, and is expected to come out with salt double-fortified with micro-nutrients, apart from existing iodine. "Salt is a very good medium to push the micro-nutrient initiative because it reaches every household," he said in a recent interview. Sidharth Punshi, MD, Jefferies India says the initiatives taken by Tata on innovation are similar to those at multinational conglomerates like Unilever, which has R&D centres around the globe.A fresh look at domestic opportunities and innovation could not have come at a more critical juncture for the group. Tata Steel revenues were down 30% to Rs 1,47,656 crore in FY10. This was due to low capacity utilisation in the first half of FY10 - primarily at Tata Steel Europe - and lower average selling prices. Tata Chemicals clocked a 24% drop in revenues on lower realisations. Indian Hotels, which owns and operates properties in India and abroad, had 6% lower revenues and posted Rs 137-crore losses for the year.The domestic focus, therefore, helps. For Tata Steel, the growing domestic market has compensated for the flat growth in Europe. Sales realisation grew 14% in the domestic market on a sequential basis. Tata Motors saw 25.3% growth in India in FY10 for passenger cars and 41% for commercial vehicles. Tata Chemicals has seen domestic demand for different products growing 6-15%, even as growth slowed in the US and Europe. "Given receding headwinds and outsourcing, coupled with government initiatives on inclusive growth, we believe India has the potential to move back to the 8-to 9% growth path," says a Citi Global Markets report. And the Tatas are definitely not going to let that opportunity go to waste.

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